Money Mistakes: The top five mistakes to avoid in your 40s

Co-author: Maddie Clarey
With a few decades under your belt – and a few solid life lessons learnt – your forties can be a pivotal decade when it comes to your finances. And, while habits developed in your twenties and thirties may have helped you achieve your targets to date, your forties are a great time to get yourself on the path to achieve some big financial goals.

Here are some potential money mistakes to avoid in your forties; whether you have teenage kids, young ones, a growing family or no kids at all, we’ll give you some pointers to think about.

1. Living too large

Cruise Ship

It can be tempting to overspend by striving to keep up when others around you are spending big on houses, holidays and luxury items. However, this is rarely wise. Be especially careful of overspending on your house or car and make sure you don’t accumulate more liabilities than you can afford. It’s also important to avoid falling into the trap of overspending as you earn more by using increased cash flow wisely.

By reviewing and resetting your budget, tracking your spending, taking care of credit card debt, boosting your credit rating, setting savings goals and understanding your financial options you can prevent yourself from overspending.

2. Making minimum mortgage repayments

If you’re a homeowner, your forties can be a great time to clear away a lot of your home loan. It can be easy to fall into old habits that may have started in your twenties or thirties. So, if you entered the property market making minimum or interest-only payments because it was all you could afford at the time, try to break the habit by using any extra cash flow to step up your repayments. That is, unless you are deliberately making minimum payments as part of a negative gearing strategy.

Similarly, be aware of overextending yourself by treating your mortgage offset account or redraw facility like an ATM. Borrowing from the equity in your home loan, or withdrawing extra cash from your offset account to fund an overseas holiday, isn’t generally a smart idea.

Paying off as much as you can afford during your forties could help you own your home sooner, while saving money on the cost of the loan.

Your 40s are a great time to start making increased payments into your mortgage.

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3. Ignoring the importance of KiwiSaver

Despite being critical to our retirement plans, it is an aspect of our finances that doesn’t always get the attention it deserves. If your KiwiSaver balance isn’t looking as healthy as you’d like, and you’re counting on Superannuation to finance your retirement, you may be in for a shock. If you’re single and living alone, you’ll only get $400.87 per week. And if you’re married – and both partners quality for Superannuation – you’ll get a combined $616.72 per week.

You may want to consider increasing your personal KiwiSaver contribution – especially if you’re only contributing at the current minimum rate of 3%.

Planning on hitting the open road in your retirement? Now is a great time to get your  KiwiSaver in order, to make sure you have the funds to go the distance.You’ll also want to make sure you have the best KiwiSaver account for your needs to make sure you’re getting the best deal.

Compare KiwiSaver funds with Canstar

4. Putting your kids’ education ahead of your retirement

If you’re a parent, your forties can be a great time to accelerate savings plans for funding your children’s high school or tertiary education. If you can afford to fund your child’s study and give them a head start, that’s great. But be careful of putting their education before your own retirement plans. If you don’t make plans for your retirement now, it can be harder to catch up later. In terms of budgeting, it’s a good idea to work out how much you’ll likely need when you retire and calculate your budget and any inclusions you’d like to make.

5. Postponing planning for the future

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It might not be pleasant to think about, but taking the time to get your will in order now can make your passing much less stressful for your family.

It’s never fun to think about what might happen after you die, but avoiding it isn’t a great idea either, particularly if you have children to care for, spouses to support or considerable assets amassed. One of the most important steps in planning for the only certainty in life is to make sure you have a valid will in place. It’s also worthwhile considering the pros and cons of trusts, which can be a great way to protect your assets.

Compare KiwiSaver funds with Canstar


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